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How Wal-Mart is using ‘Call of Duty’ to drum up its used game business

After entering the $2 billion used video game space in March, retailer Wal-Mart Stores (WMT) has expanded its video game trade-in program to 1,700 of its 3,600 stores. The rollout comes a week before the November 3 launch of Activision’s (ATVI) Call of Duty: Advanced Warfare game, which has generated over $1 billion at retail with every annual release.

According to Laura Phillips, senior vice president of entertainment at Walmart U.S., the retailer will have between 40 and 100 certified pre-owned games at each of the 1,700 stores. Stores are selling used games in either dedicated sections or value sections. Used games are selling for $12 to $30, and gamers can use the in-store credit immediately at any Walmart or Sam’s Club location. Walmart sends every used game to a third party to refurbish them before selling them in the pre-owned sections.

“We’ve been piloting this the last few months to get the best titles into the stores,” said Phillips. “There’s been great interest from customers in buying new games and new consoles by trading in their games. We’re buying used video games for more and selling certified pre-owned games for less. It makes things easier for the 117 million gamers out there.”

Walmart is riding the wave of anticipation for Call of Duty: Advanced Warfare with special launch events at 10:00 p.m. on Nov. 2 at 2,800 stores. The retailer will host multiplayer tournaments and offer giveaways like posters and patches.

“We have a lot of stores that are open 24 hours, and we noticed with large entertainment releases that we had customers show up at midnight to have the game first,” said Phillips. “Midnight sales are a big deal for games, and also with some big movie releases. Customers come into Walmart as a one-stop destination.”

The Day Zero Edition of Call of Duty: Advanced Warfare will be available to customers starting at 12:01 a.m. local time on Monday, Nov. 3 in 3,600 Walmart stores. Unlike other retailers that have been taking pre-orders for this version of the game since it was announced earlier this year, Walmart will be selling the game without any previous reservations. Phillips said all stores will have plenty of games in supply for customers to walk in and pick up.

“We’re not going to run out of this game on Day Zero or Day One,” said Phillips. “This being the largest title of the year, we want to leverage our footprint and offer this version of the game without a pre-order requirement.”

As a further incentive to entice gamers into stores on Nov. 3 and Nov. 4, Walmart is offering 50% more for customers trading in any used video game when they purchase Call of Duty: Advanced Warfare. Customers can also receive double trade-in value when trading in any used video game and purchasing a PlayStation 4 (SNE). Phillips said this deal will not apply to Xbox One (MSFT).

Michael Pachter, video game analyst for Wedbush Securities, believes Activision will sell around 21 million copies of the new Call of Duty game this year worldwide. When factoring in re-orders in early 2015, sales could reach a total of 23 to 24 million copies overall.

“We think that the expansion of pre-owned game sales is a sensible move for Walmart that matches their Everyday Low Prices value proposition,” said Joe Dodson, market analyst at EEDAR. “The increased competition should put pressure on prices for all competitors, and may mean lower prices across the board for consumers.”

Pachter doesn’t see this new push into the used games sector by Walmart having any impact on GameStop (GME), which currently is the leader in the space.

“Moms buy at Walmart and gamers buy at GameStop, Target and Best Buy, some buy online,” said Pachter. “Walmart customers are buyers of games for gifts, but they would never take their kids’ games and trade them in. It’s just not a big draw, and kids with game trade-in credits don’t have the ability to ride their bike to Walmart and buy groceries.”

GameStop President Tony Bartel said what initiatives like Walmart is doing in the used games space has done is raise awareness with the general public that people do take trades of games.

“We’ve seen no impact from any big box retailer recently, or ever, getting into the used game business, and lots of people have tried it,” said Bartel. “Lots of people have gotten into it and gotten out of it, and we just continue to do it. It’s in our DNA. It’s a very sophisticated business. You have to set the right sell price, the right trade-in price. You have to have a refurbishment center that will take in everything and be able to put it out in guaranteed fashion. It’s taken us years of complexity and expertise to develop that. It’s a difficult business to get into. What we need is for more people to know that we accept their trades, so when other competitors get into the marketplace the awareness that stores take trades on video games goes up and we’re the benefactors of that.”

Phillips said Walmart will continue to focus on used games sales as well as in-store events and in-game exclusives for big game releases. Walmart also allows gamers to use its layaway program on the purchase of both games and hardware.